By Adedapo Adesanya
Crude oil prices fell on Monday as traders focused on market fundamentals, which outweighed risks that the Middle East conflict would impact supply.
Brent crude futures settled at $87.00 a barrel after it went down by 29 cents or 0.33 per cent, and the US West Texas Intermediate (WTI) crude finished lower at $82.85 a barrel after it depleted by 29 cents or 0.35 per cent.
According to market analysts, traders see a tightening supply-demand balance in the coming months.
Geopolitical risk premiums tend not to last if supply is not disrupted since the high spare capacity of a few oil-producing countries could compensate for any supply disruptions.
Iranian Foreign Minister, Mr Hossein Amirabdollahian, reportedly said the country does not plan to respond to Israel’s retaliatory strike launched last Friday.
“As long as there is no new adventurism by Israel against our interests, then we are not going to have any new reactions,” Mr Amirabdollahian said, according to CBNC.
Investors seem to believe that Israel’s limited retaliatory strike, which does not appear to have caused any significant damage or casualties, provided Iran with an off-ramp to refrain from counterattacking.
However, if the Strait of Hormuz, the world’s most important oil route was disrupted or Saudi Arabia directly drawn into the conflict it could create an oil rally.
However, a larger supply of some of the biggest crude grades is limiting the conflict’s impact on oil futures.
In the world’s largest oil producer and consumer, inflation is back in focus, with comments from Federal Reserve officials showing that it could take some time before the market witnesses interest rate cuts.
This has led to a stronger US Dollar which makes oil more expensive for holders of other currencies.
Economic concerns have again become a bearish factor in the crude market, with prices under pressure due to a large build in the US stockpiles.
Dipo Olowookere